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Strong equity flows continue to support

Our view – Yield erosion partly offset by rise in share of equity

Revenue Yield – Equity AUM share improves but revenue yield inches lower: NAM’s equity AUM (ex-ETF) market share has improved during the quarter by 12bps QoQ and stood at 6.88%. With 14% sequential growth in equity QAAUM as against 12% sequential growth in total QAAUM, the share of equity in total QAAUM has also improved by 60bps QoQ. However, due to telescopic pricing formula as prescribed by SEBI, the equity AUM revenue yield has dropped by -3bps QoQ to 60bps. Hence, the blended yield for 1QFY25 was down by around 1bp QoQ.

Operating Expenses – Operating expenses growth to remain elevated: The employee cost for 1QFY25 has increased by 34.8% YoY, driven by fresh ESOPs granted in 1Q, increase in headcount in sales, distribution and alternatives business and higher than average annual increments. The other operating cost for 1Q has increased by 13.1% YoY. The management has guided that both the employee expense and other operating expense would grow by 12-13% YoY in FY25. We maintain ADD rating on NAM with an unchanged price target of Rs 725: We value NAM at 39x FY26 P/E, at which the stock would trade at a P/B of 10.3x.

Result Highlights (See “Our View” above for elaboration and insight)

* Revenue: Revenue from operations at Rs 5,050mn was up 7.8% QoQ and 42.6% YoY, lagging 12% QoQ and 54% YoY growth in QAAUM

* Share of Equity in AUM: Share of Equity in AUM (including Hybrid funds) at 50% was up 60bps QoQ and 530bps YoY (calculated on rounded off figures)

* Share of B-30 in AUM: Share of B-30 in AUM at 19.6% was up 10bps/30bps QoQ/YoY

* Channel mix: In overall AUM, the share of direct channel was 54%. Share of MFDs, Banks and NDs within distributed assets was 57%, 24% and 19%, respectively

* Operating profit margin: Operating profit margin for the quarter, at 62.7%, was up 57 bps QoQ and 550 bps YoY

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